On a busy day for official pronouncements, a deputy central bank governor painted a rosy picture of China's economic prospects and said Beijing would tweak monetary policy accordingly.
"At a time of crisis, maintaining the stability of major exchange rates is not only beneficial to China, it is also beneficial to the world. We must be responsible," Liu He, a senior official with the ruling Communist Party, said.
Liu is deputy director of the Office of the Central Leading Group on Financial and Economic Affairs, and his comments offered a rare insight into the thinking of a body that is instrumental in shaping decisions made by the Communist Party -- and hence the government -- but that rarely makes public statements.
"If exchange rates are volatile, trade will have no anchor. There will be disorder in capital inflows and outflows. So as a responsible big nation, we must maintain relative stability of exchange rates," Liu told a conference.
China has effectively pegged the yuan near 6.83 to the dollar since mid-2008 to help its exporters ride out the financial crisis, but its stance is under growing fire from Washington.
Lawmakers are threatening punitive duties against Chinese products unless the yuan resumes its ascent, while U.S. President Barack Obama's administration must decide on April 15 whether to label China a "currency manipulator" in a semi-annual Treasury Department report.
With the report shaping up to be a flashpoint in Sino-U.S. relations, Beijing sent a vice-commerce minister, Zhong Shan, to Washington this week to press its case.
"Some Congressmen and experts simply cited the Sino-U.S. trade surplus to conclude that China is manipulating the yuan's exchange rate," Zhong said, according to a statement released by his ministry on Friday.
"This argument is wrong. There is no logic to it," Zhong said in the statement.
Regrets
Some economists say the yuan is undervalued by 25 percent or more, serving as a subsidy for Chinese goods and costing jobs in the United States, where unemployment is nearly 10 percent.
But Liu, the Communist Party official, said a stronger exchange rate was not in the direct interest of American producers and would increase costs for American consumers.
"I am very regretful that some politicians are using this as an excuse. Why are they doing something that is not in the interests of their country? I cannot understand this," he said.
Fan Gang, an academic member of the central bank's monetary policy committee, said a stronger yuan itself was not a solution for U.S. economic woes, including employment.
In an op-ed article titled "Toying with yuan won't help us," Fan did not rule out a more flexible exchange rate.
"What is certain, however, is that China's politicians have a domestic agenda just like the Americans. The key element of that agenda is to maintain employment growth," he said.
The yuan firmed slightly in the offshore forward market but remained trapped in its recent range.
Traders were pricing in a 2.36 percent rise in the Chinese currency in 12 months' time compared with 2.27 percent implied at Thursday's close.
Economists polled by Reuters said they expected Beijing to let the yuan resume its appreciation in the second quarter but to keep its currency on a short leash, allowing a mere 3 percent rise over the next 12 months.
Vigorous
Hu Xiaolian, a People's Bank of China vice governor, made no reference to the yuan's peg as she presented one of the strongest official outlooks for the world's third-largest economy since the outbreak of the global financial crisis almost two years ago.
Speaking at the same conference as Liu, she said the stress in China's "appropriately easy" monetary policy was now on "appropriately" after an emphasis on the "easy" last year.
"That is a more targeted and flexible monet
